My Best Guess

My best guess as to what is occurring today is that retail investors are just getting out. The media got everybody worked up about the S&P downgrade and combined with the recent decline it put mom and pops over the top. They simply don't want to go through another 2008. Never mind that the folks at S&P are about as prescient as yesterday's newspaper or that Treasuries, the object of the downgrade, are screaming higher. I would actually bet that many of these mom and pops investors are fleeing into treasuries, which is what was actually downgraded.

Add to that all the momentum strategies practiced by technicians and quants. Hedge funds tend to reduce risk as well when the markets decline further adding to the negative momentum.

My sense is that the S&P downgrade is the height of the panic and that the liquidations just need to work their way through the system. I believe we will be much higher by the end of the week.

8 comments:

Anonymous said...

watch the US 10 year bonds.  That's the leading leg which NOBODY is talking about.  People are buying US bonds hand over fist is how bad Europe is.  Now take into consideration that US debt got downgraded to AA+ so bond selling on that is being totally ENGULFED by this buying pressure. IN a perverted way, if US did NOT get downgraded, bonds would be going even more parabolic and we'd be crashing even FASTER.

Anonymous said...

Fed needs to SELL treasuries here, kill gold and bid USD/CHF.  Screw this downgrade and politics blamegame crap.  Media is dumb dumber and dumberer

Tsachy Mishal said...

Are you suggesting that S&P downgrade helped market?

Anonymous said...

in the short term, stocks are inversely correlated to bonds.  yes, the amount of selling inked to the downgrade has buffered some of the panic bond buying, it woulda been even worse if they hadn't downgraded US debt.  Perverted right.  Perverted world.  On a downgrade people still want US bonds.  Europe must really be worthless

Tsachy Mishal said...

I dont even know how to respond to that.

Anonymous said...

Without this debt ceiling "debacle", bond yields would probably be sub 2% with the negative european backdrop which equates to s&p's sub 1080 by now.

Anonymous said...

Basically, this is a controlled crash in US equities

Mom And Pops Said See Ya said...

[...] downgrade. As others blamed high frequency trading the Monday following  the S&P downgrade I wrote: My best guess as to what is occurring today is that retail investors are just getting out. The [...]